Nokia's Share Buyback: A Strategic Move to Enhance Shareholder Value

Nokia Corporation, a global leader in telecommunications and consumer electronics, has announced a share buyback program to offset the dilutive effect of new Nokia shares issued to the shareholders of Infinera Corporation and certain Infinera Corporation share-based incentives. The program, initiated on 22 November 2024, targets to repurchase 150 million shares for a maximum aggregate purchase price of EUR 900 million. The repurchases will start at the earliest on 25 November 2024 and end latest by 31 December 2025.



The purpose of the repurchases is to reduce Nokia’s capital to offset the dilution from issuing additional shares. The repurchased shares will be cancelled accordingly, which aligns with the company's long-term financial goals of maintaining a strong balance sheet and enhancing shareholder value. By reducing the number of outstanding shares, the earnings per share (EPS) can potentially increase, making the company's shares more attractive to investors.



The share buyback program is expected to have a positive impact on both EPS and return on equity (ROE) in the short and long term. In the short term, the reduction in shares outstanding will increase EPS, as EPS is calculated by dividing net income by the number of outstanding shares. For example, if Nokia's net income remains constant and they repurchase 150 million shares, EPS would increase by approximately 15% (assuming the current number of outstanding shares is around 1.2 billion). The repurchased shares will also be cancelled, reducing the Company's total unrestricted equity, which will increase ROE, as ROE is calculated by dividing net income by shareholder's equity. If Nokia's net income remains constant and they repurchase 150 million shares, ROE would increase by approximately 12% (assuming the current ROE is around 15%).

In the long term, the share buyback program is expected to enhance shareholder value by increasing EPS and ROE. As the company continues to repurchase shares, the positive impact on EPS and ROE will be amplified over time. Additionally, the share buyback program signals to the market that Nokia's management believes the current share price is undervalued, which could potentially attract more investors and increase the share price in the long run. Furthermore, the program demonstrates Nokia's commitment to returning cash to shareholders, which could improve the company's reputation and investor relations.

In conclusion, Nokia's share buyback program is a strategic move that aligns with the company's long-term financial goals of maintaining a strong balance sheet, enhancing shareholder value, and managing its capital structure effectively. The program is expected to have a positive impact on EPS and ROE in both the short and long term, making it an attractive investment opportunity for shareholders.